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Allahabad Bank. (ALBK) - Chairman Speech

Company chairman speech

Dear Shareholders

Allahabad Bank a banking institution with a rich legacy continues to serve and valuethe trust of its more than 4 crore customers for over a century and a half.

Before I proceed with the Bank's performance during the financial year 2016-17 (FY17)I would like to give a bird's eye view on how the Indian economy and banking sector faredin FY17. During FY17 amid the volatilities and uncertainties in the global economyIndia's gross domestic product (GDP) clocked a growth of 7% in Dec'16 quarter. In the lastfiscal India remained a bright spot as it has attracted higher inflow of funds fromoverseas and the rupee also strengthened towards the end of the fiscal. The Indian economyis expected to pick up momentum in FY18 on account of better output in industrialproduction higher consumer spending due to remonetisation transmission of past policyrates by banks various proposals in Union Budget and expectations of normal monsoon. Interms of inflation risks are evenly balanced around the trajectory in the presentscenario.

In FY17 stressed assets of public sector banks burgeoned due to falling profit marginsand constrained debt repayment capabilities of the corporate sector. This resulted inhigher provisions for impaired loans which in turn affected the bottom-line of the banks.The RBI's Financial Stability Report Dec'16 shows that the GNPA ratio of scheduledcommercial banks (SCBs) increased to 9.1% from 7.8% between Mar'16 and Sep'16 therebypushing the overall stressed advances to 12.3% from 11.5%. Further despite theimprovement in the domestic economy demand for bank credit remained subdued owing tosluggish industrial and corporate activity. Credit growth almost halved from around 10% inSep'16 to around 5% in Mar'17. Further the small payment and universal banks becameoperational which pose another challenge to traditional banks due to increasedcompetition.

Going forward the retail segment is expected to drive credit off-take in the economyespecially with the real estate benefitting from RERA and low cost housing projects andincreased demand for consumer goods. The industrial sector is set to recover indicatingthat the banks will be able to recover their overdues resulting in improved asset quality.Your Bank will also certainly benefit from this as one of our prime focus this year willbe on recovery of dues. In addition to that the RBI's new directives on NPA resolutionwill help the Bank to resolve stressed accounts and help improve asset quality. Also theInsolvency and Bankruptcy Code 2016 is expected to ensure quicker resolution of NPAs.

Allahabad Bank's performance during FY17

During FY17 the banking sector posed challenges in terms of competition as smallpayment banks along with universal banks started their operations. Allahabad Bank throughits network of 3246 branches and committed workforce conducted business amidst thisbackdrop along with benign growth in the economy. Your Bank therefore aligned itsbusiness goals accordingly in FY17 and adopted a three-pronged strategy viz. aggressivegrowth in CASA (current and savings) business expansion of retail loan portfolio andrecovery of overdues thus arresting slippages. The Bank made a significant progress inthese areas.

I would now like to share with you some of our key performance highlights of FY17:

 As on 31st Mar'17 your Bank's total business rose by 0.45% Y-o-Y to Rs 359974crore. Total deposits surged to Rs 201870 crore thereby registering a Y-o-Y growth of0.61% despite shedding of high cost deposits to the tune of Rs 33582 crore therebybringing down the cost of deposits. Gross credit also registered a positive growth albeitmarginally (0.25%) and stood at Rs 158103 crore as on 31st Mar'17.

 Your Bank's continued focus on low cost deposits has resulted in a robust Y-o-Ygrowth of 27.15% in CASA deposits and the build-up stood at Rs 91598 crore as on 31stMar'17. Subsequently CASA share improved to 45.79% as on 31st Mar'17 from 36.20% a yearago. Your Bank's Credit- Deposit ratio stood at 79.03%.

 Your Bank's concerted effort to expand the retail segment has helped to increaseretail credit portfolio to touch a level of Rs 29168 crore recording a Y-o-Y growth of12.64% as on 31st Mar'17 and share to gross credit increased to 18.50%.

 Your Bank's operating profit decreased by 6.46% Y-o-Y on account of stress onadvances portfolio and resultant reversal/ non-booking of interest. It stood at Rs 3867crore during FY17. Spread or net interest income stood at Rs 5287 crore during FY17.

 In terms of net profit the quantum of losses decreased in FY17 as provisionswere lower by 14.29% and there was an increase in non-interest income levels. Net lossdecreased to Rs 314 crore in FY17 as compared to a net loss of Rs 743 crore a year ago.

 Your Bank has been able to maintain its Capital Adequacy Ratio above theregulatory requirement. The Bank's CRAR stood at 11.45% which constitutes Tier I ratio of8.49% and Tier II ratio of 2.96% in FY17.

 The Indian economy during FY17 was marred by tepid growth particularly in theindustry and poor demand. Therefore balance sheets of corporate entities continued to bestressed that put a constraint to their repayment capacity. The Gross NPA ratio thereforewent up by 333 bps to 13.09% in FY17. The net NPA ratio stood at 8.92% in FY17. YourBank's provision coverage ratio stood at 50.11% as on 31st Mar'17.

 Your Bank laid specific focus on recovery of bad debts to arrest fresh slippagesand proactive monitoring of loan portfolios across businesses. A separate vertical headedby General Manager (Credit Monitoring) has been functioning at Head Office level for closemonitoring and supervising the Bank's loan assets. A new online version of LAMP (LoanAsset Monitoring Portal) has been introduced for effective monitoring of all creditaccounts with aggregate exposure of Rs 1.00 Crores and above. All important documentsrelated to the accounts are available for functionaries at all levels and can be viewedand examined to arrest any stress signals (Including Early Warning Signals).

Social Banking (Financial Inclusion)

Your Bank is committed towards the socio-economic development of the people anduplifting the society. Banking services do not discriminate people; it includes peoplefrom all walks of life under its umbrella. Your Bank works in tandem with self-help groups(SHGs) and other agencies to extend its services to the masses.

Your Bank has actively participated in mobilizing Pradhan Mantri Jan Dhan Yojana(PMJDY) accounts since its inception. As on 31st Mar'17 the Bank has opened 65.95 lakhPMJDY accounts with deposit of Rs 1220 crore. To extend card based transaction to suchcustomers micro- ATMs have been introduced at 5041 business correspondent (BC) locations.

Here I would like to share that your Bank's concerted efforts have helped the Bank tobe adjudged as the Best Bank in PMJDY implementation in the category of Group- OtherStates and bag the prestigious Prime Ministers' Award for Excellence in PublicAdministration for North 24 Parganas (West Bengal). Also your Bank bagged the Winnershield in the Mid-sized Banks category in recognition of excellent performance for AadhaarEnable Payment Systems by National Payment Corporation of India for FY16. Lastly asacknowledgement of financial inclusion landscape achieved by your Bank it has beenadjudged as runner-up in the category of Best Financial Inclusion Initiatives amongstmedium-sized banks-"Banking Technology Award 2017" by Indian Banks Association.

Under the Financial Inclusion Project (FIP) your Bank has provided basic bankingfacilities through inter-operable Kiosk Banking Solution (KBS) at 5063 Bank Mitralocations using Micro ATMs. Additionally facility of e-KYC has been made available at allkiosk locations operated by Bank Mitras for auto-population of Aadhaar and Mobile seeding.Under New Initiative Plan Pass Book printing facility at Bank Mitra locations is atadvanced stage. RD/FD Opening Functionality at Bank Mitra Locations have already beencommenced.

Your Bank provides financial awareness/ literacy though 19 Financial Literacy Centres(FLCs) located in all the lead districts and also through Bank Mitras located in villagesthrough kiosks. Various meeting and camps are organized at regular intervals through FLCcounselors and also at Bank Mitra locations. These camps and meetings emphasize oncreating awareness about PMJDY Atal Pension Yojana (APY) MUDRA loans Pradhan MantriJeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).

Strides in Technology and Alternate Delivery Channels

Until now your Bank focused on building alternate delivery channels like ATM cashdeposit machines internet banking mobile banking etc. It is now working towardsensuring a superior customer experience and for better alignment of its services with thecustomers' expectations and also to further the cause of a less-cash economy. Thereforethe Bank has now undertaken several initiatives to improve the quality of internet bankingand mobile banking along with debit card services to increase the ease of banking. TheBank has introduced security features for VISA cards transaction through one-time passwordauthentication (OTP). The growth in usage as well as new registration of alternatedelivery channels of the Bank has increased manifold since their introduction.

To further reach out to customers the Bank has also introduced the facility toregister for mobile banking through internet banking and network of ATMs. Also newfeatures like registration for APY facility to link different accounts in mobile bankingscheduling RTGS/NEFT transactions State tax payment of Tamil Nadu and Chattisgarh andonline submission of 15G/ 15H has been enabled.

In the present times where everything is technology driven and mobile phone has becomean integral device in our day to day functioning your Bank has launched 'AllBank UnifiedPayment Interface' app which allows funds transfer facility through mobile from oneaccount to another by means of virtual addresses link all accounts including those openedwith other banks for making transactions and facilitate payments to merchants as analternate to POS machines and cash transfer.

Human Resource Development

During FY17 HR climate in the Bank was extremely harmonious and conducive to businessdevelopment. In the area of manpower planning cadre wise superannuation vis--vismanpower requirement and promotion in various cadres and scales were taken intoconsideration. The Bank recruited 1276 employees comprising 452 POs 145 SpecialistOfficers 660 clerical staff and 19 sub-staff.

Keeping in view the corporate priorities special programmes with focus on RetailCredit and Recovery were conducted for officers in various scales. With a view to improveNFNI earnings programmes were conducted on products related to government business forofficers handling government business in branches. A special programme "DevelopingFuture Managers" was devised and conducted for officers who were on the verge ofcompleting two years of service in the Bank to make them competent for shouldering higherresponsibilities.

The Bank also conducted induction programmes for the newly recruited ProbationaryOfficers (POs) and Single Window Operators-A (SWO-A). Refresher programmes were conductedfor POs and Clerical staff who were recruited in the previous year and had undergoneInduction programme. With a view to strengthen the HR Cells at FGMO and ZO level aprogramme was conducted for officers posted therein. A Faculty Development Programme wasalso conducted for all the in-house faculties of the Bank.

Awards and Accolades

Your Bank has earned awards and accolades in different areas. Most notably your Bankhas been awarded in recognition of its constant efforts towards financial inclusion asalready stated earlier. Further your Bank has been receiving award from NSDL for the last4 consecutive years in opening the maximum number of Demat Accounts under PSU Bankscategory in the eastern region. The award was again conferred on the Bank during theNSDL's 31st DP Conference held at Kolkata on 24th Dec'16.

Way Forward and Future Strategies

The RBI has projected India's gross value added (GVA) to rebound by 7.4% in 2017-18.The banking sector will definitely benefit and shall ride along the wave of growth. Takinginto account the optimistic outlook of the economy and its different sectors your Bankwill align its business objective to maximize its gains. The Bank shall primarily focus onaggressive recovery drive further build-up in CASA rebalancing of loan book with focuson SMARt loans (S: Small M: Micro A: Agriculture and Rt: Retail loans) therebyincreasing its share to the loan book supported by technology. Further the Bank believesthat its employees are its valuable assets and therefore up-scaling of officers by meansof training shall be undertaken. The Bank will also look at different avenues to raisecapital.

To conclude I extend my appreciation and gratitude to all the stakeholders of thisheritage banking institution along with its valued customers committed employees anddirectors for their persistent support and untiring trust. The Bank is also grateful tothe GoI RBI and other regulatory authorities and financial institutions for theircontinued co-operation.